Dividend Stocks are Not in a Bubble

U.S. equity markets have been roaring in 2013, with new market highs being set. In the face of such strong performance, whispers abound about the potential for a pullback. The 2013 rally has been led by higher-dividend, defensive sectors, and we have seen some analysts question whether there is a “dividend bubble.” To the contrary, we think dividend stocks in aggregate are attractively priced.

While one can argue that the Consumer Staples, Health Care, Telecommunication Services and Utilities sectors are becoming expensive, since they’ve led the recent rally, we believe it is a mistake to make the generalization that all dividend payers are becoming expensive based on that fact alone. Additionally, there are dividend-focused indexes that do not have majority exposure to these sectors, so avenues exist through which one can apply a dividend focus without having to seek exposure to defensive sectors.

Source: ETF Trends

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